If you get bad grades, say goodbye to the academic scholarship. If you don't meet X expectations for your club or research lab, goodbye to that scholarship. I just had to "cut" a grad student from my research team because quite simply she wasn't publishing/producing. I have limited funds, and have to support the productive students who frankly deserve it.

Why would athletic scholarships be different? You sign a kid based on potential, but if he doesn't pan out and fulfill expectations, sometimes you have to let him go. But as this article says, this can even be the most merciful thing to do if you help the kid land in a spot somewhere else with playing time.